The insurance regulator has proposed commission limits across life and health insurance products, with different caps for agents and other distribution entities.
Highlights
- IRDAI has proposed specific caps on commissions paid by insurers.
- For individual non-linked and unit-linked plans of up to 5 years, agents’ first-year commission is proposed at 6.25%.
- Other distribution entities could receive up to 5% in the first year for these policies.
- For life policies of 10 years and above, agents could receive up to 25% first-year commission.
New Delhi: The Insurance Regulatory and Development Authority of India (IRDAI) has proposed new limits on commissions paid by insurance companies as part of a broader effort to control distribution costs and lower overall expense limits.
According to the consultation paper, the proposed commission structure would vary depending on the insurance segment, policy duration, distribution channel, product complexity and the effort involved in selling and servicing a policy.
For individual non-linked and unit-linked life insurance policies with a term of up to five years, the first-year commission for agents is proposed to be capped at 6.25%, while the limit for other distribution entities, including corporate agents and brokers, would be 5%. Renewal commission limits are proposed at 2% for agents and 5% for distribution entities.
For life insurance policies with a term of 10 years or more, agents could receive a first-year commission of up to 25%, followed by a 5% renewal commission. Distribution entities would be allowed up to 20% in the first year and 3% on renewals.
The regulator has also proposed a revised structure for health insurance. For individual health policies, first-year commission would be capped at 15% for distribution entities, 20% for agents and associates, and 5% for hospitals. Renewal commissions would be capped at 5% for distribution entities and 10% for agents and associates.
The proposed changes are part of IRDAI’s attempt to strengthen cost discipline across the insurance industry. The regulator noted that the existing framework relies significantly on board-approved commission policies, while the new proposal seeks clearer limits and stronger regulatory oversight.
The proposal is currently open for public and stakeholder comments until October 25, 2026.
